Sovereign Eurobonds: The Credit Rating Agency · PDF fileEurobonds – Pros and Cons Pros...
Transcript of Sovereign Eurobonds: The Credit Rating Agency · PDF fileEurobonds – Pros and Cons Pros...
Permission to reprint or distribute any content from this presentation requires the prior written approval of
Standard & Poor’s. Copyright © 2014 by Standard & Poor’s Financial Services LLC. All rights reserved.
Sovereign Eurobonds:
The Credit Rating Agency Perspective
Christian Esters, CFA
Senior Director
Sovereign Ratings EMEA Emerging Markets
September 2014
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Rising Number Of New Non-Investment Grade Sovereigns
Strong Correlation Between Sovereign Ratings And Defaults
Ratings Useful For Issuers and Investors
Investors seek:
• Independent opinion to help
assess credit risk and to compare
different issuers and debt issues
• Establish thresholds for credit
risk and investment guidelines
• Diversification of investments
• Enhanced liquidity in secondary
markets
Borrowers/Issuers seek:
• Independent view of their
creditworthiness and credit
quality of their debt issues
• Expand the universe of
investors
• Diversification of funding
sources
• Independence
• Objectivity
• Insightful Analysis
Features of
Credit Ratings
Rating Process
Analytical Team
Appointed
Appeal Process
Rating Issued
Meeting with
Government
Rating
Committee Government
Informed
Preliminary
Research
Rating Request
Surveillance
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Sovereign Ratings Criteria
Foreign Currency Sovereign Ratings
Monetary
Score
Institutional
and
governance
effectiveness
Score
Economic
Score
Fiscal
Score
External
Score
Flexibility and
performance
Profile
Institutional and governance
effectiveness and economic
Profile
Sovereign Indicative
Rating Level
Global EM Borrowing To Remain Broadly Unchanged in 2014
Varying Debt Structures
Growing Allure Of Eurobonds For Africa?
Repricing of EM Risk
Eurobonds – Pros and Cons
Pros
Potentially Lower Funding Cost
Diversification Of Funding Sources
Foreign Currency Reserves
Domestic Capital Market
• Crowding out? Absorption capacity?
Transparency and outside scrutiny create confidence
Cons
Volatile Investor Risk Appetite
Bullet Maturities
• Roll-over risk?
• Fiscal And External Obligation
• Sinking fund?
Exchange Rate Risk
Domestic Capital Market
• Liquidity?
Permission to reprint or distribute any content from this presentation requires the prior written approval of
Standard & Poor’s. Copyright © 2014 by Standard & Poor’s Financial Services LLC. All rights reserved.
Thank You
Christian Esters, CFA
Senior Director T: +49 69 33 999 242 [email protected]
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Copyright © 2014 by Standard & Poor’s Financial Services LLC. All rights reserved.
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